{"id":34750,"date":"2006-09-05T00:00:00","date_gmt":"2006-09-04T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/rajasthan-state-road-transport-vs-indag-rubber-ltd-on-5-september-2006"},"modified":"2017-10-13T18:18:08","modified_gmt":"2017-10-13T12:48:08","slug":"rajasthan-state-road-transport-vs-indag-rubber-ltd-on-5-september-2006","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/rajasthan-state-road-transport-vs-indag-rubber-ltd-on-5-september-2006","title":{"rendered":"Rajasthan State Road Transport … vs Indag Rubber Ltd on 5 September, 2006"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Rajasthan State Road Transport … vs Indag Rubber Ltd on 5 September, 2006<\/div>\n
Author: A Mathur<\/div>\n
Bench: H.K. Sema, A.K. Mathur<\/div>\n
           CASE NO.:\nAppeal (civil)  7032 of 2001\n\nPETITIONER:\nRAJASTHAN STATE ROAD TRANSPORT CORPN.\n\nRESPONDENT:\nINDAG RUBBER LTD.\n\nDATE OF JUDGMENT: 05\/09\/2006\n\nBENCH:\nH.K. SEMA & A.K. MATHUR\n\nJUDGMENT:\n<\/pre>\n
JUDGMENT<\/p>\n
A.K. MATHUR, J.\n<\/p>\n
This appeal is directed against the order dated 22.12.2000 passed by
\nlearned Single Judge of the High Court of Judicature for Rajasthan, Jaipur
\nBench, Jaipur in S.B. Civil Misc. Appeal No.618 of 2000 whereby learned
\nSingle Judge set aside the order passed by the District Judge, Jaipur City
\nin CMA (Arb.) No.256 of 1997 confirming the award dated 4.4.1997 passed by
\nthe Arbitrator and issuing a decree in terms of the award in favour of the
\nRajasthan State Road Transport Corporation (hereinafter to be referred to
\nas the Corporation).\n<\/p>\n
The facts giving rise to this appeal are that an agreement was executed
\nbetween Indag Rubber Limited ( hereinafter to be referred to as the
\nCompany) and the Corporation on 24.7.1991 for purchase of cold processing
\nretreading plant and retreading material. According to Clause 3 of the
\nagreement, in the cold processing plant of the company no other retreading
\nmaterial except of Indag would be used during subsistence of the contract
\nprovided the company supplies retreading material regularly and
\nuninterruptedly as per the need of the Corporation. Clause 4 contemplated
\nthat the corporation would purchase retreading material from the company at
\nthe prevailing rates against the rate contract of the Association of State
\nRoad Transport Undertaking. Clause 5 deals with warranty for retreaded
\ntyres, according to which the company was required to guarantee performance
\nof 46000 KMs average life or 95% of new tyres in each division in similar
\ncondition whichever is less and the performance would be assessed initially
\nafter 12 months on the commissioning of plant and production of tyres and
\nsubsequently on quarterly basis, and on failure of guaranteed kilometers,
\nthe company is bound to compensate on pro rata basis. Clause 10 pertains to
\narbitration. As per the  arbitration clause any dispute between the parties
\nregarding interpretation of the terms and conditions or their fulfillment,
\nboth the parties shall refer the dispute to the Chairman of the Corporation
\nwho after hearing both the parties shall give the decision which shall be
\nfinal and binding on the parties.\n<\/p>\n
The grievance of the Corporation was that retreaded tyres used on its
\nbuses, such tyres could not achieve the guaranteed kilometers as per
\nwarranty clause 5, whereupon the company was informed of such deficiency in
\nits retreaded tyres. The Corporation informed the company through their
\nvarious letters dated 27.2.1993, 30.3.1993, 12.5.1993, 29.6.1993,
\n15.7.1993, 20.1.1994 and 16.7.1994 that retreaded tyres used on its buses
\nin their eight regions were not giving the guaranteed kilometerage
\nresulting in loss to the corporation to the tune of Rs.1,19,53,430.92 paise
\nwith 18% interest. Therefore, the Corporation called upon the company to
\nmake payment of the aforesaid loss calculated on the basis of pro rata on
\neach retreaded tyre. The Corporation also claimed a sum of Rs.25 lacs
\ntowards damages.  Therefore, the total amount claimed by the Corporation
\nworked out to Rs.1,44,53,430.92 paise. The Company denied its liability and
\nsubmitted that the Corporation has wrongly construed the agreement because
\nthe essential feature of warranty clause 5 was that comparative assessment
\nof new tyre life with retreaded tyre was to be made in each division in
\nsimilar conditions. It was also submitted that as per clause 3 complete
\nretreading material which also included repair material was to be purchased
\nfrom the Company only because of the reason that after a tyre is worn out
\nit is first repaired so as to give it basic strength before it is retreaded
\nthereby repairing of tyre was essential part of the process of retreading.
\nSurprisingly enough the Corporation did not purchase any repair material
\nfrom the company resulting in breach of clause 3 of the agreement.
\nAccording to the company, since improper repair material was used by the
\nCorporation, therefore, 25% to 30% of the tyres allegedly removed
\nprematurely had caused damages on account of bursting, cutting of the
\ntyres, which could not have been used or considered for assessment of a
\nretreaded tyre’s life. It is alleged that the Company by its letters dated
\n14.11.1991, 16.11.1991, 17.1.1992 and 7.5.1992 had informed the Corporation
\nthat while assessing performance of retreaded tyres, the tyres removed from
\nwheels prematurely due to bursts should be treated separately like one side
\nwear or spotty wear, run flat etc. should not be taken into account. For
\nthe performance of remaining tyres only comparison should be made with the
\nnew tyres. The Company also advised that the repair material should be
\npurchased from the company and it was also mentioned that the tyres should
\nbe compared in similar condition and since the new tyres were fitted on the
\nrear axle, therefore the performance was bound to be lower and thus
\nassessment of performance of the retreaded tyres was not in similar
\nconditions.  It was also pointed out that performance should be compared
\nwith new tyres of the same design as on rear axles in each division before
\ncomparison with performance of Indag retreaded tyres. It was also pointed
\nout by communication dated 14.5.1990 that the performance of retreaded
\ntyres when used on the front wheels should be compared with new tyres’
\nperformance on the front wheels fitted to the vehicles operated on similar
\nroutes likewise the tyres used on rear axle. It was also submitted that
\nsince the Corporation used retreaded tyres in conditions not similar to one
\nin which new tyres were used, therefore, their performance was bound to
\nvary. The Company emphasized that the method of assessment adopted by the
\nCorporation was not proper. The Company cited the case of Maharashtra State
\nRoad Transport Corporation and submitted that new tyres were fitted on the
\nsame axle of the bus as of retreaded tyres and then the performance was to
\nthe extent of 97 to 99 % with that of the new tyre.  It was submitted that
\nbecause of not employing the same method of assessment the result has
\nvaried. The Company cited the example of Ajmer Division and pointed out
\nthat performance of retreaded and new tyres is satisfactory. It was also
\npointed out that the performance was likely to vary Divisionwise because
\nJaipur- Delhi national highway route could give a better result than the
\nJaipur Lalsot  route as it is not having similar condition as that of
\nJaipur Delhi National Highway. The company also joined the issues with
\nregard to calculation of loss.  On the basis of these pleadings, a sole
\narbitrator was appointed i.e.  the Principal Secretary, Home and Justice,
\nGovernment of Rajasthan. The arbitrator framed the following three issues
\nfor determination.\n<\/p>\n
\t” (1) Whether the retreaded tyres which failed for other reasons
\n\tlike burst etc. should be taken into account while assessing
\n\tperformance of the retreaded tyres ?\n<\/p>\n
\t(2) Whether the claimant was required to use repair material
\n\tsupplied by Indag only ? and<\/p>\n
\t(3) Whether the retreaded tyres and new tyres were used in similar
\n\tconditions for the purpose of assessing their comparative
\n\tperformance?”\n<\/p>\n
The arbitrator after hearing the parties and taking into consideration the
\ndocuments on record decided all the issues in favour of the Corporation by
\nits award dated 4.4.1997 and concluded that the Corporation suffered a loss
\nto the tune of Rs.1,19,53,430.92 paise. However, the arbitrator declined to
\ngrant additional sum of Rs.25 lacs claimed as damages by the Corporation.
\nAfter that award dated 4.4.1997 was produced in the Court of the District
\nJudge on 24.5.1997, the District Judge issued notice to both the parties
\nand after considering the matter and hearing the parties made the award as
\na rule of the court by its order dated 22.11.1999. Aggrieved against the
\nsaid order, the Company filed an appeal before the High Court of Rajasthan
\nand the matter came up before the learned Single Judge for disposal.
\nLearned Single Judge after examining the matter held that the essential
\nfeature of the warranty clause for comparative assessment of new tyres with
\nthe retreaded tyres was necessary to be made in each division in similar
\ncondition. Learned Single Judge further held that method of assessment was
\nnot in conformity with reference to warranty clause 5 that comparative
\nassessment of performance of retreaded tyres with new ones, was improper.
\nIt was also observed that as per figures shown by the Corporation they had
\nused 14,395 retreaded tyres from June, 1991 to May, 1992 out of which total
\ntyres received after completing retreaded life were 7,797. Learned Single
\nJudge also held that as per the inspection report dated 19.11.1991 total
\n148 tyres were inspected. Similarly, on 20.11.1991 30 tyres were inspected.
\nIt was also observed that apart from joint inspection report, three other
\ninspections were held for 452 tyres on 4.10.1991, 135 tyres on 29.10.1991
\nand 522 tyres on 12.11.1991 and as per these joint inspection reports, the
\nCorporation claimed that the tyres had not performed according to their
\nwarranty as stipulated in Clause 5 of the agreement. Learned Single Judge
\nfurther held that the inspection reports as well as other documentary
\nevidence led by both the parties did not show comparative assessment of
\nretreaded and new tyres with a view to find out as to the guaranteed
\nkilometerage as stipulated in clause 5 of the agreement. Learned Single
\nJudge concluded that in his considered opinion, the significant aspect
\nbearing material to the dispute under the arbitration as to the award of
\ncompensation on pro rata basis has totally been ignored not only by the
\narbitrator but also by the District Judge under the impugned award and
\ndecree. Learned Single Judge further observed that the arbitrator did not
\napply his mind to the joint inspection reports or calculation sheet on the
\nbasis of which the Corporation has claimed compensation considering only
\nperformance of retreaded tyres without making comparative assessment of
\nperformance of both retreaded and new tyres. On the basis of the above
\nfinding, learned Single Judge set aside the judgment and decree passed by
\nthe District Judge, Jaipur City confirming the award dated 4.4.1997 passed
\nby the arbitrator and remanded back the matter to the Corporation for fresh
\nadjudication of the dispute by appointing an arbitrator other than the one
\nwho has passed the award earlier. Aggrieved against this impugned order
\npassed by learned Single Judge, High Court of Rajasthan at Jaipur, the
\npresent Special Leave Petition was filed by the Corporation.\n<\/p>\n
We have heard learned counsel for the parties and perused the records.\n<\/p>\n
Learned counsel for the appellant strenuously urged before us that the
\nlearned Single Judge has upset the finding of fact recorded by the
\narbitrator and has examined the matter like an appellate authority which is
\nnot open to the learned Single Judge. Learned counsel for the appellant
\nsubmitted that the arbitrator after recording necessary evidence and after
\nexamining the whole material on record, came to the finding that the claim
\nof the Corporation deserves to be accepted partially. But the learned
\nSingle Judge sitting as a court of appeal has upset the finding of fact
\nrecorded by the arbitrator. Learned counsel for the appellant in support of
\nhis submission invited our attention to a decision of this Court in the
\ncase of B.V. Radha Krishna v. Sponge Iron India Ltd.,<\/a> reported in [1997] 4
\nSCC 693 and submitted that  it is not open to the learned Single Judge to
\nsit as a court of appeal while disposing of the award of the arbitrator
\nwhich was made the rule of the court.  In the above decision, it was
\nobserved as under:\n<\/p>\n
\t“Bearing in mind the principles laid down by this Court in the
\n\tabovesaid cases, if we look into disposal of the matter by the High
\n\tCourt, it would be evident that the High Court has substituted its
\n\town view in place of the Arbitrator’s view as if it was dealing
\n\twith an appeal. That is exactly what is forbidden by the decisions
\n\tof this Court. Therefore, we have no hesitation to set aside the
\n\tjudgment of the High Court on this issue.”\n<\/p>\n
In this connection, learned counsel for the appellant invited our attention
\nto a decision of this Court in the case of State of Rajasthan v. Puri
\nConstruction Co.Ltd. & Anr.,<\/a> reported in [1994] 6 SCC 485 wherein it was
\nobserved as under:\n<\/p>\n
“However, in the anxiety to render justice to the party to arbitration, the
\ncourt should not reappraise the evidence intrinsically with a close
\nscrutiny for finding out that the conclusion drawn from some facts, by the
\narbitrator is, according to the understanding of the court, erroneous. Such
\nexercise of power which can be exercised by an appellate court with power
\nto reverse the finding of fact, is alien to the scope and ambit of
\nchallenge of an award under the Arbitration Act. If a question of law is
\nreferred to arbitrator and the arbitrator comes to a conclusion, it is not
\nopen to challenge the award on the ground that an alternative view of law
\nis possible. Even if it is assumed that on the materials on record, a
\ndifferent view could have been taken and the arbitrators have failed to
\nconsider the documents and materials on record in their proper perspective,
\nthe award is not liable to be struck down in view of judicial decisions
\nreferred to hereinbefore. Error apparent on the face of the record does not
\nmean that on the closer scrutiny of the import of documents and materials
\non record, the finding made by the arbitrator by itself does not constitute
\nmisconduct warranting interference with the award.”\n<\/p>\n
 As against this, learned counsel for the respondent-Company submitted that
\n in fact there was no material on which the finding was recorded by the
\n Arbitrator. In support thereof, learned counsel invited our attention to a
\n decision of this Court in the case of K.P. Poulose v. State of Kerala &
\n Anr.,<\/a> reported in [1975] 2 SCC 236 wherein it was held that the award can
\n be set aside on the ground of misconduct if relevant documents are not
\n considered by the Arbitrator. Therefore, we asked learned counsel for the
\n appellant- Corporation to substantiate  the finding recorded by the
\n arbitrator that it is based on the material on record. In pursuance to the
\n direction given by this Court, learned counsel for the Corporation filed
\n an affidavit on 12.7.2006 and submitted that the document wherein the
\n details on divisionwise average kilometer of new tyres and retreaded tyres
\n along with average short-fall in guaranteed kilometers for the various
\n periods was on record of arbitrator and same was produced before us. The
\n details were given of all the Divisions i.e. Bharatpur, Jaipur, Sikar,
\n Kota, Ajmer, Bikaner, Jodhpur and Udaipur. In all these eight divisions
\n for the various period i.e. from June 1991 to February, 1994 the details
\n have been given to substantiate the allegations that what was the average
\n mileage of the new tyre and what was the average mileage given by the
\n retreaded tyres and on that basis, the short-fall was given and
\n accordingly, the amount of loss was worked out. These details which were
\n placed before us  formed part of the record before the arbitrator. The
\n arbitrator in his detailed award has recorded his finding on the basis of
\n the average performance of new vehicle tyres witht that of the retreaded
\n tyres of the Company and on that basis he has worked out the assessment in
\n paragraph 17 of the award. Paragraph 17 of the award reads as follows :\n<\/p>\n
“The RSRTC has compared the performance of retreaded tyres with the
\nperformance of new tyres in each division. In each division, as mentioned
\nearlier, the road conditions, the vehicles used, the weather conditions,
\nthe general driving skills of the drivers and the level of maintenance and
\nupkeep of vehicles were similar for the new tyres as well as retreaded
\ntyres. The retreaded tyres should have given a kilometerage of 46,000 or 95
\n% of the life of new tyres. Therefore, the assessment of the performance
\ndone by the RSRTC is strictly in conformity with the provisions of clause 5
\nof the agreement. Notwithstanding the acceptance by the respondent of an
\nerror of judgment in guaranteeing 46,000 kms for a retreaded tyre, from the
\nStatements enclosed by the claimant with its letters mentioned in para 5 of
\nthis order, it is clear that the retreaded tyres performance fell short of
\nthe guaranteed level. I, therefore, find claim of the RSRTC to be fully
\njustified.”\n<\/p>\n
This is the finding of fact given by the arbitrator. As against this,
\nlearned Single Judge as mentioned above, has held that there was no
\nassessment in each division in similar conditions. Therefore, the learned
\nSingle Judge set aside the award but  it is not factually correct. As
\nmentioned above, there was a comparative assessment given by the
\nCorporation and that was part of the record before the arbitrator and on
\nthat basis the finding of fact was recorded by the arbitrator. Learned
\ncounsel for the respondents strenuously urged before us that the
\nperformance of new tyres and of retreaded tyres on roads like Jaipur-Delhi
\nwould be better as against the road of Jaipur-Lalsot. Therefore, there was
\nno assessment of performance of the new tyres vis-a-vis the retreaded tyres
\nsupplied by the Company in similar conditions. In fact, an average has to
\nbe taken of each division. It is not necessary that in each of the
\ndivisions of the Corporation, the road conditions will be similar. Once the
\ncompany has entered into an agreement knowing fully well the conditions
\nobtaining in the State of Rajasthan that all the routes in the State are
\nnot the roads of Class `A’ category but there are roads of Class `A’, Class
\n`B’ and Class `C’ categories also. Therefore, the average performance has
\nbeen recorded taking into consideration this aspect. It is unlikely that
\nall over the State of Rajasthan the road condition like Jaipur-Delhi will
\nbe available for all other divisions. Therefore, in all the divisions the
\naverage performance has been taken into consideration. The assessment has
\nbeen based on average of similar conditions of the roads i.e. the good
\nquality as well as the poor quality. Therefore, average performance of the
\nnew tyres with the retreaded tyres has to be taken on the basis of roads
\navailable in Rajasthan. The average running of the new tyres on these road
\nconditions with that of the retreaded tyres was to be compared to find out
\nwhether the performance of retreaded tyres was up to 95% average or not.
\nAfter assessing the comparative assessment and going through the materials
\non record the arbitrator has recorded his finding. It was for the company
\nif they wanted more information or wanted to allege that the road
\nconditions are not similar or that the performance of the tyres which were
\nfitted in the rear axle or on the front axle would not be the same, all
\nthese details if it wanted, it could have obtained from the Corporation but
\nthey did not do so and only at this stage the company wants to bring this
\nfactual controversy  that retreaded tyres were not used in similar
\nconditions. This argument at this belated stage cannot be accepted as all
\nthe materials have been considered by the arbitrator and after taking into
\nconsideration the average of each tyre in each region of the corporation
\nhas worked out that the performance of the retreaded tyres was not to the
\nextent of 95%. This was a finding of fact recorded by the arbitrator and
\nthe same was made rule of the court by the District Judge. But the learned
\nSingle Judge erroneously took upon himself to sit as a court of appeal and
\ndisturbed this finding of fact. In our opinion, the view taken by the
\nlearned Single Judge of the High Court cannot be sustained.\n<\/p>\n
Learned counsel for the respondent-company next submitted that the
\narbitrator has awarded interest at the rate of 12% per annum from the date
\nof the award i.e. 4.4.1997. Learned counsel for the respondent submitted
\nthat it was excessive as long spell of time has expired since the date of
\nthe award. Therefore, granting of interest at the rate of 12% per annum
\nwill be burdensome for the company. Therefore, learned counsel for the
\nrespondent prayed that some relief in interest be given. After bestowing
\nour best of consideration, we are of opinion that awarding of interest at
\nthe rate of 12% per annum from the date of award i.e. 4.4.1997 till the
\nrealization of the amount will be too excessive. Therefore, looking to the
\npeculiar facts and circumstances of this case, we reduce the rate of
\ninterest from 12% to 6% per annum. We allow this appeal and set aside the
\njudgment and order dated 22.12.2000 passed by learned Single Judge of the
\nHigh Court of Rajasthan at Jaipur in SBCMA No.618 of 2000 and affirm the
\ndecree passed by the District Judge, Jaipur City making the award rule of
\nthe Court. The appellant shall be entitled to interest at the rate of 6%
\nper annum from the date of the award till realization of the amount in
\nquestion. No order as to costs.<\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Rajasthan State Road Transport … vs Indag Rubber Ltd on 5 September, 2006 Author: A Mathur Bench: H.K. Sema, A.K. Mathur CASE NO.: Appeal (civil) 7032 of 2001 PETITIONER: RAJASTHAN STATE ROAD TRANSPORT CORPN. RESPONDENT: INDAG RUBBER LTD. DATE OF JUDGMENT: 05\/09\/2006 BENCH: H.K. SEMA & A.K. MATHUR JUDGMENT: JUDGMENT A.K. […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-34750","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nRajasthan State Road Transport ... vs Indag Rubber Ltd on 5 September, 2006 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/rajasthan-state-road-transport-vs-indag-rubber-ltd-on-5-september-2006\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Rajasthan State Road Transport ... vs Indag Rubber Ltd on 5 September, 2006 - 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